UK government-backed terrorism reinsurer Pool Re has completed placement of a £2.4 billion retrocession program, its largest to date.
Led by Munich Re, the £2.4 billion cover represents a £100 million expansion from its 2018 placement and includes £75 million provided by Pool Re’s terrorism catastrophe bond launched last year.
The bond, which was issued through special-purpose vehicle Baltic PCC Ltd, is designed to move UK taxpayers even further from the risks that Pool Re mutualises on their behalf.
Hannover Re also provided a significant part of the new £2.4 billion coverage, along with over 50 international reinsurers.
The retrocession covers property damage arising from nuclear, biological, chemical, and radiological attacks; those arising from cyber-triggered terrorist losses; as well as conventional terrorist acts.
It is structured as an aggregate excess of loss treaty which will attach if Pool Re’s losses, individually or in aggregate, exceed £400 million in any year, after member insurers’ combined retention of £250 million per event or £410 million in aggregate.
“For the second year in a row, this risk was modelled using Pool Re’s own model, developed in collaboration with Cranfield University and Guy Carpenter,” said Steve Coates, Pool Re’s Chief Underwriting Officer.
“It deploys Computational Fluid Dynamics to assess blast risk which considers how blasts move over, around and between buildings.
“With this continuing improvement in our modelling, we have been able to see changes in the exceedance curve, which led to the creation of a new £100m layer in order to reduce the attachment point to £400 million.”
James Nash, Chief Executive Officer of Guy Carpenter’s international division, noted “Pool Re has once again been successful in sourcing new capacity from reinsurers in a challenging market whilst maintaining their core relationships.
“This demonstrates the wide support Pool Re that is able to achieve with their proactive and foresighted approach to the peril, coverage and technical expertise. This is an excellent result that Guy Carpenter is delighted to have brokered for them.”
Julian Enoizi, Pool Re CEO, added, “We are pleased to have finalised this extended retrocession placement, one of the largest reinsurance deals in the world.
“As Pool Re continues to return UK terrorism risk to commercial markets, this programme is a core part of our strategy of further distancing the taxpayer from potential loss.”
